Question 1

The personal holding company penalty tax rate is

Accepted Answer

The personal holding company penalty tax rate is 20%.

Question 2

Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made.

Accepted Answer

According to the information provided, Wind Corporation's taxable income is $100,000 and its charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation. Therefore, the corporation's UPHCI (unrelated business income tax payable) would be $95,000.

Question 3

Identify which of the following statements is true.

Accepted Answer

Statement B is true. Consent dividends (A) are dividends declared by the board of directors without the need for prior approval from shareholders. Statement C is false as throwback dividends (also known as accumulated earnings dividends) refer to dividends paid in a later tax year that are attributable to earnings from a previous tax year. Statement D is false as statement B is true.

Question 4

Larry Corporation purchased a new precision casting machine for its manufacturing facility.The machine cost $2 million,and another $150,000 was spent on installation.The machine was placed in service in June 2009.The old machine,which was placed in service in 2003,was sold in 2009 to an unrelated party for a $250,000 financial accounting profit.What asset disposition and capital recovery issues do you need to address when removing the old machine from,and placing the new machine on,the financial accounting and tax books and in calculating the 2009 tax depreciation?

Accepted Answer

The answer of Larry Corporation purchased a new precision casting...

Question 5

Identify which of the following statements is true.

Accepted Answer

Only statement B is true. The personal holding company tax and accumulated earnings tax have separate objective and subjective tests for determining their applicability. Statement A is false because the personal holding company tax cannot be used as a credit against a corporation's regular tax amount. Statement C is false because income from personal service contracts is included in personal holding company income.

Question 6

The personal holding company tax might be imposed

Accepted Answer

The personal holding company tax is imposed if more than 50% of the company is owned by five or fewer individuals for the entire year. Therefore, option C is the correct choice. Option A is incorrect as it might be imposed on corporations only. Option B is incorrect as it is limited to companies whose gross income arises solely from rentals with no services rendered. Option D is incorrect as it applies to small business investment companies only.

Question 7

All corporations,except S corporations and small C corporations,must calculate the ACE adjustment.

Accepted Answer

The ACE (adjusted current earnings) adjustment is required for all corporations except S corporations and C corporations that qualify as small corporations. This adjustment is made to calculate the corporation's alternative minimum tax (AMT) liability.

Question 8

How is alternative minimum taxable income computed?

Accepted Answer

The answer of How is alternative minimum taxable income computed?...

Question 9

Identify which of the following statements is true.

Accepted Answer

The personal holding company tax is levied to prevent closely held corporations from sheltering passive income. Option B mentions a corporation that is classified as a personal holding company, but the given details do not meet the criteria to be classified as a personal holding company. Option C mentions professional fees earned by the corporation as personal holding company income, which is incorrect. Therefore, option A is the only statement that is true.

Question 10

Investors Corporation has ten unrelated individual shareholders who each own 10% of the outstanding stock.For their tax year ended December 31 of this year,Investors' gross income includes:
 $\begin{array} { l  }
 \text { Interest on federal government obligations }&\$10,000\
\end{array}$
 Dividends from savings and loan associations
 $\begin{array} { l  }
 \text {on passbook savings accounts }&\$2,000\
 \text { Interest earned on notes receivable  }&\$5,000\
 \text {Net rental income }&\$3,000\
\end{array}$
 No dividends are paid during the tax year or during the 2-1/2 month throwback period.Deductible administrative expenses total $4,000 for the year.Rental income has been reduced by $1,000 of depreciation and $2,000 of interest expense.What is Investors' undistributed personal holding company income?

Accepted Answer

The answer of Investors Corporation has ten unrelated individual shareholders...

Question 11

What are the four general rules that provide a framework for the ACE calculation?

Accepted Answer

The answer of What are the four general rules that...

Question 12

Rich Company sold equipment this year for $50,000.The equipment had been depreciated using 200% declining balance.Accumulated depreciation totals $60,000 for regular tax purposes and $70,000 for AMTI.The equipment originally cost $90,000.What AMT issues does this sale present?

Accepted Answer

The answer of Rich Company sold equipment this year for...

Question 13

A personal holding company cannot take a dividends-paid deduction for

Accepted Answer

The answer of A personal holding company cannot take a...

Question 14

Identify which of the following statements is false.

Accepted Answer

The answer of Identify which of the following statements is...

Question 15

Identify which of the following statements is false.

Accepted Answer

The statement that Askew Corporation is a personal holding company is false. A personal holding company is defined as a corporation that meets certain stock ownership and income tests. However, the statement provides information only on stock ownership and does not mention income, so it cannot be determined whether Askew Corporation meets the income test for a personal holding company.

Question 16

Explain the carryover provisions of the minimum tax credit.

Accepted Answer

The answer of Explain the carryover provisions of the minimum...

Question 17

Foster Corporation has gross income for regular tax purposes of $100,000,which includes a net Sec.1231 gain of $10,000 and a net capital gain of $10,000.Ordinary gross income for personal holding company purposes is

Accepted Answer

To determine the ordinary gross income for personal holding company purposes, we need to subtract the following items from the gross income for regular tax purposes:

1. All items of gross income that are not included in personal holding company income calculation (e.g. tax-exempt interest, certain dividends received, etc.)
2. Deductions directly connected with such gross income.

Since we do not have any information about these items, we can only make an assumption that there are no items that are not included in personal holding company income calculation and that the deductions are equal to zero. Therefore, to calculate the ordinary gross income for personal holding company purpose, we need to subtract the net capital gain of $10,000 from the gross income for regular tax purposes:

$100,000 - $10,000 = $90,000.

However, a net Sec. 1231 gain is included in personal holding company income. Therefore, we need to add this amount back to the result:

$90,000 + $10,000 = $100,000

Finally, personal holding company income is reduced by the dividends paid deduction, which is equal to 20% of the personal holding company taxable income. Since we do not have any information about the dividends paid, we cannot determine the personal holding company taxable income or the dividends paid deduction. Therefore, the ordinary gross income for personal holding company purposes equals $100,000.

However, this assumes that there are no items of gross income that are not included in personal holding company income calculation and no deductions directly connected with such gross income. If there are such items or deductions, the result may be different.

Question 18

Which of the following is not an adjustment to taxable income when computing the personal holding company tax?

Accepted Answer

All of the options listed are adjustments to taxable income when computing the personal holding company (PHC) tax. The dividends-received deduction, dividends-paid deduction, and NOL carryover from the immediately preceding tax year are all considered when adjusting taxable income for PHC tax purposes.

Question 19

Identify which of the following statements is true.

Accepted Answer

None of the statements accurately describe the tax treatment of deficiency dividends or the consequences of paying them. A deficiency dividend allows a personal holding company (PHC) to correct a prior year's undistributed personal holding company income by distributing it as a dividend in a later year, potentially reducing the PHC tax for the earlier year. However, the specifics of how and when these dividends affect shareholder income and the PHC's tax obligations are not correctly described in any of the provided statements.

Question 20

In the current year,Sun Corporation's federal income taxes before credits are $220,000.Its TMT is $100,000.Their only available credit is a research credit (part of the general business credit)of $160,000.The general business credit is limited to what amount?

Accepted Answer

The answer of In the current year,Sun Corporation's federal income...

Quiz 5: Other Corporate Tax Levies

The personal holding company penalty tax rate is

Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made.

Identify which of the following statements is true.

Identify which of the following statements is true.

The personal holding company tax might be imposed

All corporations,except S corporations and small C corporations,must calculate the ACE adjustment.

How is alternative minimum taxable income computed?

Identify which of the following statements is true.

What are the four general rules that provide a framework for the ACE calculation?

Rich Company sold equipment this year for $50,000.The equipment had been depreciated using 200% declining balance.Accumulated depreciation totals $60,000 for regular tax purposes and $70,000 for AMTI.The equipment originally cost $90,000.What AMT issues does this sale present?

A personal holding company cannot take a dividends-paid deduction for

Identify which of the following statements is false.

Identify which of the following statements is false.

Explain the carryover provisions of the minimum tax credit.

Foster Corporation has gross income for regular tax purposes of $100,000,which includes a net Sec.1231 gain of $10,000 and a net capital gain of $10,000.Ordinary gross income for personal holding company purposes is

Which of the following is not an adjustment to taxable income when computing the personal holding company tax?

Identify which of the following statements is true.

In the current year,Sun Corporation's federal income taxes before credits are $220,000.Its TMT is $100,000.Their only available credit is a research credit (part of the general business credit)of $160,000.The general business credit is limited to what amount?